OPERATION

MANAGEME
NT 
CONTINUE …......

100 Marks

MID 25
Final 40
Project 20 (Group Report and Presentation)
Assignments 15 (5 x3Marks Each)

Recommended Book:
Operations Management (11th Edition)
Jay Heizer
UNDERSTANDING OF THE
SUBJECT:
Supply Chain Management
 Supply Management
 Operation Management
 Logistics Management
 Integration 
 WHAT IS OPERATION
MANAGEMENT
Operations management is the administration of business practices to
create the highest level of efficiency possible within an organization. It is
concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization.
 FUNCTION OF OPERATION
MANAGEMENT

Operations management is the business function that responsible

to planning, organizing, coordinating and controlling the resources
needed to produce a company's products and services.
 OBJECTIVE OF OPERATION
MANAGEMENT
The main objective of operation management is to
provide conversion capabilities for meeting the
organization's goal and strategy. Operation
Management has certain objectives to remain in
competitive which can be grouped together in
following ways: Performance Objectives. Cost
Objectives.
WHAT OPERATIONS AND SUPPLY
CHAIN MANGER DO
Operation Management:
Design >> Operation >> and improvement of production system.
What is Operation:
A function or system that transforms input into outputs  of greater value.
Transforming Process:
A series of activities along a value chain extending from supplier to
customer
Activities that do not add value are superfluous and should be
eliminated.
 OPERATION STRATEGY 
A plan specifying how an organization will allocate
resources in order to support infrastructure and
production. An operations strategy is typically
driven by the overall business strategy of the
organization, and is designed to maximize the
effectiveness of production and support elements
while minimizing costs.
IMPORTANT PERFORMANCE
FACTORS OF OPERATION
MANAGEMENT
Time
Cost 
Flexibility
 Products / Services
 Mix
 Volume and Delivery

Dependability
Quality
Speed

The link of Performance factor with Competitive factors.

PRODUCTION VS OPERATION
Production:
Production is the creation of goods and services
Operation Management (OM):
Is the set of activities that creates value in the form of goods and
services by transforming inputs into outputs.
ORGANIZING TO PRODUCE
GOODS AND SERVICES
Important / Essential functions:

Marketing: to create demand / requirement considering objectives

and vision
Production / Operation: Produce the products
Finance: Tracks and control the how well organization doing well
DISCUSSION OF
MANUFACTURING VS
SERVICE OM

Class discussion and interactive session with students to

understand the basic difference and organization chart of
Manufacturing & Service Industry
TEN CRITICAL DECISION OF
OM
1. Design of goods and services
2. Managing Quality
3. Process and capacity design
4. Location strategy
5. Layout Strategy
6. Human Resources and job design
7. Supply Chain Management
8. Inventory Management
9. Scheduling
10.Maintenance
THE CRITICAL DECISIONS

Design of goods and services

What good or service should we offer
How should we design these products and services

Managing quality
How do we define quality
Who is responsible for quality
THE CRITICAL DECISIONS

Process and capacity design

 What process and what capacity will these products require?
 What equipment and technology is necessary for these processes?

Location strategy
 Where should we put the facility
 On what criteria should we base the location decision?
THE CRITICAL DECISIONS
Layout strategy
How should we arrange the facility
How large must the facility be to meet our plan

Human resources and job design

How do we provide a reasonable work environment
How much can we expect our employees to produce 
THE CRITICAL DECISIONS
Supply chain management
 Should we make or buy this component
 Who are our suppliers and who can integrate into our e-commerce program

Inventory, material requirements planning,

and JIT
 How much inventory of each item should we have
 When do we re-order?
THE CRITICAL DECISIONS
Intermediate and short–term scheduling

Are we better off keeping people on the payroll during slowdowns

Which jobs do we perform next

Maintenance
Who is responsible for maintenance
When do we do maintenance
CLASS DISCUSSION

Why critical decisions are important for

Operation Management…..
OUT COME OF CLASS
DISCUSSION
& ASSIGNMENT #1

Explain OM and its Objectives for the success of organization ? How

OM differentiate competitive superiority and improve bottom line.
WHERE ARE THE OM JOBS
Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
THE FOUNDATIONS OF SUPPLY CHAIN MANAGEMENT

Supply Supplier management, supplier evaluation,

Management supplier certification, strategic partnerships

Demand management, MRP, ERP, inventory

Operations visibility, JIT (AKA lean production & Toyota
Production System), TQM (AKA Six Sigma)

Transportation management, customer

relationship management, distribution network,
Logistics
perfect order fulfillment, global supply chains,
service response logistics

Key process integration, performance

Integration
measurement
 DEMAND
FORECASTING
INTRODUCTION
DEMAND FORECASTING
Companies must find ways to better match supply & demand
(reduce bullwhip effect) to achieve optimal levels of cost,
quality, & service to enable them to compete with other
supply chains.
Improved forecasts benefit all trading partners in the supply
chain & mitigate supply-demand mismatch problems.
Costs of a bad forecast?
 DEMAND FORECASTING
An estimate of future demand & provides the basis for
planning decisions
Goal is to minimize forecast error
The factors that influence demand must be considered
when forecasting.
Managing demand requires timely & accurate forecasts
Good forecasting provides reduced inventories, costs, &
stock outs, & improved production plans & customer
service
FORECASTING
TECHNIQUES

Qualitative forecasting is based on opinion &

intuition.

Quantitative forecasting uses mathematical models

& historical data to make forecasts.
 Time series models are the most frequently used among all the
quantitative forecasting models.
FORECASTING
TECHNIQUES (CONT.)

Qualitative Forecasting Methods

Used when data are limited, unavailable,
or not currently relevant.
Four qualitative models used are:
1. Jury of executive opinion
2. Delphi method
3. Sales force composite
4. Consumer survey
FORECASTING
TECHNIQUES (CONT.)

Quantitative Methods
Time series forecasting- based on the
assumption that the future is an extension of
the past. Historical data is used to predict
future demand.
Cause & Effect forecasting- assumes that
one or more factors (independent variables)
predict future demand.
It is generally recommended to use a
combination of quantitative & qualitative
techniques.
FORECASTING
TECHNIQUES (CONT.)

Components of Time Series

Data should be plotted to detect:
 Trend variations: increasing or decreasing
 Cyclical variations: wavelike movements that are longer than a
year (e.g., business cycle)
 Seasonal variations: show peaks & valleys that repeat over a
consistent interval such as hours, days, weeks, months, years, or
seasons
 Random variations: due to unexpected or unpredictable events
 INVENTORY
MANAGEMENT
INTRODUCTION
Inventory can be one of the most expensive assets of
an organization
Inventory may account for more than 10% of total
revenue or 20% of total assets
Management must reduce inventory levels, but avoid
stock outs
MATCHING SUPPLY &
DEMAND
Suppliers must accurately forecast demand, to produce & deliver
the right quantities, at the right time, for the right cost.
Suppliers must find ways to better match supply & demand to
achieve optimal levels of cost, quality, & customer service.
Problems that affect product & delivery will have ramifications
throughout the chain.
DEPENDENT &
INDEPENDENT DEMAND
Inventory management models are either dependent
demand or independent demand models.
Dependent Demand

Describes the internal demand for parts based on the

demand of the final product in which the parts are used.
(Subassemblies, components, & raw materials)
Independent Demand

Demand for final products; affected by trends, seasonal

patterns, competition & general market conditions.
CONCEPTS AND TOOLS OF INVENTORY MANAGEMENT

Functions and Basic Types of Inventory

The primary functions of inventory are to:

 Buffer uncertainty in the marketplace &
 Decouple dependencies in the supply chain (e.g., safety
stock)

Four broad categories of inventories

 Raw materials- unprocessed purchase inputs.
 Work-in-process (WIP)- partially processed materials not yet
ready for sales.
 Finished goods- products ready for shipment.
 Maintenance, repair & operating (MRO)- materials used in
production (e.g., cleaners & brooms).
 CONCEPTS AND TOOLS OF
INVENTORY MANAGEMENT (CONT.)
Inventory Costs

 Direct costs- directly traceable to unit

produced (e.g., labor)
 Indirect costs- cannot be traced directly to
the unit produced (e.g., overhead)
 Fixed costs- independent of the output
quantity (e.g, buildings, equipment, & plant
security)
 Variable costs- vary with output level (e.g.,
materials)
 Order costs- direct variable costs for making
an order. In mfg, setup costs are related to
machine setups
 Holding or carrying costs- incurred for
 CONCEPTS AND TOOLS OF
INVENTORY MANAGEMENT (CONT.)
Inventory Investment
Firms should measure inventory
investment. Measures include:
 Absolute value of inventory (balance sheet)
 Inventory turnover or turnover ratio- how many times inventory
“turns” in an accounting period.
Annual Revenues or COGS
Inventory Turnover Ratio =
**Average Inventory

** Divide the sum of the Beginning and Ending

inventory in half to calculate the Average
Inventory
CONCEPTS AND TOOLS OF
INVENTORY MANAGEMENT (CONT.)
ABC Inventory Control System
Determines which inventories should be managed
more closely than others
- A items: highest priority; about 20 % of the total
items, and 80 % of the total inventory cost
- B items: moderate priority; about 30% of the
total items, and 15% of total inventory cost
- C items: low priority; about 50% of total items &
only 5% of costs.
 INVENTORY MODELS
The Economic Order Quantity (EOQ) Model

A quantitative decision model; finds trade-off between inventory

holding costs & order costs.

The EOQ model minimizes the sum of the annual order cost & the
annual inventory holding cost.

Order Cost is the direct variable cost associated

with placing an order.
Holding Cost or carrying cost is the cost
incurred for holding inventory in storage.
INVENTORY MODELS (CONT.)
Assumptions of the EOQ Model

 Demand must be known & constant.

 Delivery time is known & constant.
 Replenishment is instantaneous.
 Price is constant.
 Holding cost is known & constant.
 Ordering cost is known & constant.
 Stock-outs are not allowed.
RESOURCE PLANNING
SYSTEMS
OUTLINE
Operations Planning
 The Aggregate Production Plan
 The Chase Production Strategy
 The Level Production Strategy
The Mixed Production Strategy
Master Production Scheduling
 Master Production Schedule Time Fence
 Available-to-Promise Quantities
The Bill of Materials
Material Requirements Planning
 Terms used in Material Requirements Planning
Capacity Planning
 Capacity Strategy
Distribution Requirements Planning
(CONT.)
The Legacy Material Requirements Planning Systems
 Manufacturing Resource Planning
The development of the Enterprise Resource Planning
Systems (ERP)
 The Rapid Growth of ERP Systems
Implementing ERP Systems
Single Integrator ERP Solution or Best-of-Breeds ERP
Implementation?
Advantages and Disadvantages of ERP Systems
 ERP System Advantages
 ERP System Disadvantages
ERP Software Applications
ERP Software Providers
 INTRODUCTION

Scheduling & inventory management influence how assets

are deployed.

Problem: A missed due date or stock-out may cascade

downstream, magnifying the bullwhip effect.

Operations managers are continuously involved in balancing

capacity & output.
 OPERATIONS PLANNING
Operations planning is usually hierarchical & can be divided
into three broad planning categories :

 Long-range- Aggregate Production Plan (APP) involves the

construction of facilities & major equipment purchases

 Intermediate - Shows the quantity & timing of end items (i.e.,

master production schedule- MPS)

 Short-range - detailed planning process for components & parts

to support the master production schedule (i.e., materials
requirement planning- MRP)
 OPERATIONS PLANNING
(CONT.)
Computer based “push” resource systems:
Closed-loop MRP - incorporates the aggregate production
plan, the master production schedule material requirements plan,
& capacity requirements plan.

Manufacturing resource planning (MRP-II) incorporates

the business & sales plans with the closed-loop MRP system
(allows “what-if”).

Enterprise requirements planning (ERP) is an extension

of MRP-II (integrates with units/partners)

Distribution requirement planning (DRP) describes the

time-phased net requirements from warehouses & distribution
AGGREGATE
PRODUCTION PLAN
Hierarchical planning – Long range.

 Planning horizon of APP- at least one year & is usually rolled forward by
three months every quarter

 Includes costs relevant to the aggregate planning decision include

inventory, setup, machine operation, hiring, firing, training, & overtime
costs
AGGREGATE PRODUCTION PLAN (CONT.)

Three basic production strategies :

1. Chase Strategy - Adjusts production (and capacity) to match

demand. Firm hires & lays off workers to vary capacity. Finished
goods inventory remains constant. Works well for make-to-order
firms.

2. Level Strategy - Relies on a constant output rate while

varying inventory & backlog according to fluctuating demand.
Firm relies on fluctuating finished goods & backlogs to meet
demand. Works well for make-to-stock firms.

3. Mixed Production Strategy - Maintains stable core workforce

while using other short-term means, such as overtime,
subcontracting & part time helpers to manage short-term
MASTER PRODUCTION
SCHEDULING
Master Production Schedule (MPS) - A disaggregation
of the APP. Lists the exact end items to be produced for
specific periods.
 Planning horizon is shorter than APP, but longer than the lead
time to produce the item.

The MPS - used for computing the requirements of all

time-phased end items.

System nervousness - small changes in the upper-

level-production plan cause major changes in the lower-
level production plans.
MASTER PRODUCTION
SCHEDULING (CONT.)

Available-to-Promise (ATP) Quantity -

The difference between confirmed customer orders & the
quantities the firm plans to produce.

Three basic methods of calculating the

ATP quantities:
1. Discrete available-to-promise
2. Cumulative available-to-promise without look ahead, &
3. Cumulative available-to-promise with look ahead.
MASTER PRODUCTION
SCHEDULING (CONT.)

Discrete Available-to-Promise
1. Add the Beginning Inventory to the MPS for Period 1, subtracting the Committed
Customer Orders from Period 1 up to but not including the period of the next
scheduled MPS.
2. For all subsequent periods, there are two possibilities:
 If no MPS has been scheduled for the period, the ATP is zero.
 If an MPS has been scheduled for the period, the ATP is the MPS minus the sum
of all the CCOs from that period up to the period of the next scheduled MPS.

3. If an ATP for any period is negative, the deficit must be subtracted from the most
recent positive ATP, and the ATP quantities must then be revised to reflect these
changes.
THE BILL OF MATERIALS
Bill of Materials (BOM) - a list of all component parts &
assemblies making up the final product; shows all
assembly/part relationships.

 Dependent Demand - the internal demand for parts based on the

demand of the final product in which the parts are used (e.g.,
subassemblies).

 Independent Demand – external demand for final products

 Multilevel Bill of Materials - shows the parent-component

relationships & the specific units of components known as the planning
factor. Often presented as an indented bill of materials.
THE BILL OF MATERIALS (CONT.)
All Terrain Level 0
Vehicle (ATV) (Finished Good)

Engine Suspension Exhaust & Body & Level 1

Chassis Transmission
Assembly & Brake Fuel System Accessories

Engine Cylinder Piston Seals & Level 2

Crankshaft Camshaft
Block head Assembly Gaskets

Piston Sub- Connecting 12” Steel Level 3

Assemblies (4) Rods (4) Bar (½)

Piston Rings 24” Solid

Piston Level 4
(3) Steel Bar

6” Steel Level 5
Bar (¼)

24” Solid Level 6

Steel Bar
MATERIAL REQUIREMENTS
PLANNING
MRP - A computer-based materials management system that
calculates the exact quantities, need dates, & planned order
releases for subassemblies & materials required to manufacture
a final product. MRP requires:
 The independent demand information
 Parent-component relationships from the BOM
 Inventory status of final product & components.
 Planned order releases (the output of the MRP system)

Advantage of MRP - provides planning information

Disadvantages of MRP - loss of visibility, especially acute for
products with a deep BOM. Allows safety stock, safety lead time
to impact plans
MRP (CONT.)
Terms used in MRP:
1. Parent: Item generating demand for lower-level components.
2. Components: parts demanded by a parent.
3. Gross requirement: A time-phased requirement prior to netting
out on-hand inventory & lead-time
4. Net requirement: The unsatisfied item requirement for a
specific time period. Gross requirement for period minus
current on-hand inventory.
5. Scheduled receipt: A committed order awaiting delivery for a
specific period.
6. Projected on-hand inventory: Projected closing inventory at
end of period. Beginning inventory minus gross requirement,
plus scheduled receipt & planned receipt & planned receipt
from planned order releases.
7. Planned order release: Specific order to be released to the
shop or to the supplier.
MRP (CONT.)
8. Time bucket: Time period used on the MRP. Days or weeks.

9. Explosion: Process of converting a parent item’s planned order releases into component gross
requirements.

10. Planning factor: Number of components needed to produce a unit of the parent item.

11. Firmed planned order: Planned order that the MRP computer logic system does not automatically change
when conditions change to prevent system nervousness.

12. Pegging: Relates gross requirements for a part to the planned order releases

13. Low-level coding: assigns the lowest level on BOM to all common components to avoid duplicate MRP
computations.

14. Lot size: The order size for MRP logic

15. Safety Stock: Protects against uncertainties in demand supply, quality, & lead time.
CAPACITY PLANNING
Excess (or insufficient) capacity prevents firm from
taking advantage of the efficiency of manufacturing
planning & control system.
Resource Requirement Planning (RRP) - a long-range
capacity planning module, checks whether aggregate
resources are capable of satisfying the aggregate
production. Resources considered include gross labor
hours & machine hours.
Medium-range capacity plan, or rough-cut capacity
plan (RCCP) - used to check feasibility of MPS. Converts
MPS from production needed to capacity required, then
compares it to capacity available.
Capacity requirement planning (CRP) - a short-range
capacity planning technique that is used to check the
feasibility of the material requirements plan.
DISTRIBUTION
REQUIREMENTS PLANNING
(DRP)
Distribution requirements planning (DRP) - a time-phased
finished good inventory replenishment plan in a distribution
network
-- DRP is a logical extension of the MRP system & ties physical distribution to
manufacturing planning and control system
DEVELOPMENT OF ERP
SYSTEMS
Enterprise Resource Planning Systems (ERP) - information
system connecting all functional areas & operations of an
organization &, in some cases, suppliers and customers via
common software infrastructure and database

-- ERP provides means for supply chain members to share information

so that scarce resources can be fully utilized to meet demand, while
minimizing supply chain inventories
ADVANTAGES & DISADVANTAGES OF
ERP SYSTEMS

Advantages
 Added visibility reduce supply chain inventories
 Single, centralized database
 Helps to standardize manufacturing processes
 Measure internal & SCM performance & communicate via a standardized
method

Disadvantages
 Substantial time & large capital investment
 Complexity
 Firms must adapt processes to meet ERP system requirements
ERP SOFTWARE
APPLICATIONS
Major ERP applications consist of:
 Accounting and finance:
 Customer relationship management
 Human resource management
 Manufacturing
 Supplier relationship management
 Warehouse management
 Supply chain management
 PROCESS MANAGEMENT: LEAN
PRODUCTION & SIX SIGMA QUALITY
 OUTLINE
Introduction
Lean Production & the Toyota Production System
Lean Production & Supply Chain Management
The Elements of Lean Production
Lean Production & the Environment
The Origins of Six Sigma Quality
Six Sigma & Lean Production
Six Sigma & Supply Chain Management
The Elements of Six Sigma
The Statistical Tools of Six Sigma
 INTRODUCTION

In 1990s, supply chain management combined:

 Quick response (QR)- speed & flexibility
 Efficient Consumer Response (ECR)- speed & flexibility
 JIT – Continuous reduction of waste
 Keiretsu Relationships- Including suppliers in JIT/TQM efforts

These approaches have emerged as philosophies & practices known

as Lean Production (or Lean Manufacturing) & Six Sigma Quality
LEAN PRODUCTION & THE TOYOTA
PRODUCTION SYSTEM

JIT emphasizes:
 Reduction of waste
 Continuous improvement
 Synchronization of material flows within the organization
 Channel integration- extending partnerships in the supply chain

Now JIT is referred to as:

Lean Production- operating philosophy of waste reduction &
value enhancement; originally created as Toyota Production
System (TPS) by key Toyota executives.
LEAN PRODUCTION & SUPPLY CHAIN
MANAGEMENT

Supply chain management (SCM) seeks to

incorporate Lean elements using:
 cross-training,
 satisfying internal customer demand
 quickly moving products in the production system
 communicating demand forecasts & production schedules
up the supply chain
 optimizing inventory levels along the supply chain
 Channel integration- extending alliances to suppliers’
suppliers & customers’ customers
THE ELEMENTS OF LEAN
PRODUCTION
Waste (Muda) Reduction

Firms reduce costs & add value by eliminating

waste from the productive system.

Waste encompasses wait times, inventories,

material & people movement, processing steps,
variability, any other non-value-adding activity.

Taiichi Ohno described the seven wastes

THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
The Seven Wastes
Wastes Description
Overproducing Unnecessary production to maintain high utilizations

Waiting Excess idle machine & operator & inventory wait time

Transportation Excess movement of materials & multiple handling

Over-processing Non-value adding manufacturing & other activities

Excess Inventory Storage of excess inventory

Excess Movement Unnecessary movements of employees

Scrap & Rework Scrap materials & rework due to poor quality
THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
The Five-S’s of waste reduction
Japanese S-Term English Translation English S-Term Used
1. Seiri Organization Sort
2. Seiton Tidiness Set in order
3. Seiso Purity Sweep
4. Seiketsu Cleanliness Standardize
5. Shitsuke Discipline Self-discipline
THE ELEMENTS OF LEAN
PRODUCTION (CONT.)

Lean Supply Chain Relationships

 Suppliers & customers work to remove waste, reduce
cost, & improve quality & customer service.
 Lean thinking includes having suppliers deliver smaller
quantities, at right time, delivered to the right location, in
the right quantities.
 Firms also develop lean supply chain relationships with
key customers (locating warehouses close to customers,
for example)
THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
Lean Layouts
Lean layouts are very visual (lines of visibility are
unobstructed) with operators at one processing
center able to monitor work at another.
Use of Manufacturing cells
 Process similar parts or components saving duplication of
equipment & labor
 Are often U-shaped to facilitate easier operator & material
movements.
 THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
Inventory & Setup Time Reduction
Excess inventory is a waste
Reducing inventory levels causes production
problems
Once problems are detected, they can be
solved.
The end result is a smoother running
organization with less inventory investment.
THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
Small Batch Scheduling
 Drives down costs by:
 Reducing raw material, WIP, & finished goods inventories
 Makes the firm more flexible to meet customer demand.

 Small production batches are accomplished with the use

of kanbans.

 Kanbans generate demand for parts at all stages of

production creating a “pull” system.
 THE ELEMENTS OF LEAN
PRODUCTION (CONT.)
Continuous Improvement (Kaizen)
 Continuous approach to reduce process, delivery, &
quality problems, such as machine breakdown
problems, setup problems, & internal quality
problems.

Workforce Commitment
 Managers must support Lean Production by providing
subordinates with the skills, tools, time, & other
necessary resources to identify problems &
implement solutions.
THE ORIGINS OF SIX SIGMA
QUALITY
Six Sigma
Near quality perfection (becoming defect free 99.99966% of
the time, or 3.4 DPMO)
Pioneered by Motorola in 1987
A statistics-based decision-making framework designed to
make significant quality improvements in value-adding
processes
an enterprise and supply chain-wide philosophy, that
emphasizes a commitment toward excellence &
encompasses suppliers employees, and customers
SIX SIGMA & LEAN
PRODUCTION
Lean Six Sigma (Lean Six)
Describes the melding of lean production and Six Sigma quality
practices.
Both use:
 High quality input materials, WIP, and finished goods
 Continuous Improvement (Kaizen)

Lean and Six Sigma use complementary tool sets and are not
competing philosophies
ELEMENTS OF SIX SIGMA
Deming’s Way – 14 Points for Mgt.
1.Create constancy of purpose 7.Institute leadership.
to improve product & service.
8.Drive out fear.
2.Adopt the new philosophy.
9.Break down barriers between
3.Cease dependence on departments.
inspection to improve quality.
10.Eliminate slogans &
4.End the practice of awarding exhortations.
business on the basis of price.
11.Eliminate quotas.
5.Constantly improve the
production & service system. 12.Remove barriers to pride of
workmanship.
6.Institute training on the job.
13.Institute program of self-
improvement
14.Put everyone to work to
accomplish the transformation
ELEMENTS OF SIX SIGMA
(CONT.)
Crosby’s Way
Four Absolutes of Quality
1. The definition of quality is conformance to requirements
2. The system of quality is prevention.
3. Performance standard is zero defects.
4. The measure of quality is the price of nonconformance
ELEMENTS OF SIX SIGMA
(CONT.)
Juran’s Quality Trilogy
Quality Planning- Identify internal/external customers &
their needs, develop products that satisfy those needs.
Mangers set goals, priorities, & compare results
Quality Control- Determine what to control, establish
standards of performance, measure performance, interpret
the difference, & take action
Quality Improvement- Show need for improvement,
identify projects for improvement, implement remedies,
provide control to maintain improvement.
ELEMENTS OF SIX SIGMA
(CONT.)
Six Sigma Training Levels (Table 8.10)
Levels Description
Yellow Belt Basic understanding of Six Sigma Methodology and tools in the DMAIC problem
solving process. Team member on process improvement project.

Green Belt A trained team member allowed to work on small, carefully defined Six Sigma
projects, requiring less than a Black Belt’s full-time commitment.

Black Belt Thorough knowledge of Six Sigma philosophies and principles. Coaches
successful project teams. Identifies projects and selects project team members.

Master Black Belt A proven mastery of process variability reduction, waste reduction and growth
principles and can effectively present training at all levels